A couple of weeks ago, business news headlines trumpeted the rise of the entrepreneurial ranks among baby boomers. As it happens, the headlines were a little off.

A recent Small Business Administration study showed that small business ownership among the post-WWII generation (born between 1946-1964) has actually declined in the past several years, a surprising finding with many contributing factors.

As Kent Hoover wrote in the May 1 edition of Washington Business Journal, it is still true that the number of Baby Boomer entrepreneurs increased considerably between 1996 and 2012. Hoover cited a Kaufmann Foundation report showing that 23.4 percent of all self employed in the United States in 2012 were boomers, up from 14.3 percent in 1996. This is the report that sparked news reports calling the Baby Boom generation the next great wave of entrepreneurs.

Except it isn’t. The pin in the bubble came in April, with the release of the SBA study showing a decline in numbers of self-employed Baby Boomers, and explaining why some data might make the situation appear otherwise.

Bloomington, Ind.-based Bradley T. Heim Consulting, which authored the study, found that the reason for the increase in the percentage Baby Boomers among the numbers of all self-employed is due to the increase in numbers of Boomers as a whole. In other words, it is not that Boomers have more of a tendency to become self-employed than any other age group, it is simply that there are more people in the age group now than in 1996.

Further, looking only at the 55-64 age group, the SBA study found that the self-employment rate dipped from more than 18 percent to 14.3 percent between 1994 and
2012.

The reasons for the decline are numerous, and according to the SBA, starting with the increased numbers of people who have turned 55 while still employed by a private firm or the public sector. The self-employment among 55-year-olds alone is lower than that for the 55-64 age group as a whole. Additionally, there are also more people in this age group exiting self-employment to work for a private or public employer (As Hoover noted, this is a number that would be in flux if the Affordable Care Act helps ease reliance on employer-subsidized benefits.).

The study also found that women and African Americans in the age group are less likely than Boomers as a whole to start a business and more likely to leave entrepreneurship for wage-and-salary employment. Older members of the age group are less likely to leave their businesses for a job with a company, but more likely to leave self-employment for retirement.

Also, the rate of self-employment among Boomers is tied to income and education, with the rate increasing with higher income and education levels.

Reference:

Hoover, Kent. “Baby Boomers Aren’t So Entrepreneurial After All“. Washington Business Journal. May 1, 2014.

Heim, Bradley T. “Understanding Self-Employment Dynamics Among Individuals Nearing Retirement“. SBA website. April 2014.